Saturday April 11 2020

In Summary

DESPERATE TIMES. Aviation is one of the hardest hit industries by the Covid-19, facing billions of dollars lost in revenue. Amidst these challenges, travel agents under their umbrella body Uganda Association of Travel Agents (TUGATA), are concerned about the future of their businesses, loss of jobs and increasing pressure for refunds, writes Eric Ntalumbwa.

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By Eric Ntalumbwa

For the last eight years, James Mutebi, a travel agent at Destine Link Travel in the heart of Kampala, has specialised in providing air ticketing services, visa guidance, hotel bookings and managing reservations for travellers for trips outside Uganda.

When Covid-19 hit China in December last year and the aviation industry, Mutebi immediately got booking cancellations. “Embassies such as China, where I secured visas closed. For those days, I stayed at the office with neither a single booking for a ticket nor a hotel booking. I experienced difficulty to pay operational costs and wages. By the time President Museveni announced a lock down, I had not paid my monthly rent,” says Mutebi.

Covid-19 grounds airlinesAviation is one of the hardest hit industries by the virus, facing billions of dollars in lost revenue. According to International Air Transport Association (IATA), a trade association of 290 world’s airlines, 25 million jobs are at stake, considering the decreasing demand for air travel, amidst the crisis.

Globally, the livelihoods of some 65.5 million people depend on the aviation industry for survival, including sectors such as travel and tourism. Among these are 2.7 million airline jobs. In a scenario of severe travel restrictions lasting three months, IATA research calculates that 25 million jobs in aviation and related sectors are endangered, across the world with two million jobs affected in Africa.

Airlines are expected to see a whole year’s passenger revenues fall by $252 billion (44 per cent) in 2020, compared to 2019. The second quarter is most critical with demand falling up to 70 per cent at its worst point.

Plight of travel agentsAmidst the pandemic, travel agents under their umbrella body The Uganda Association of Travel Agents (TUGATA), are concerned about the future of their businesses, loss of jobs, which will bring forth a breed of quack agents, but most importantly, increasing pressures for refunds. Richard Mujuzi, the chairman TUGATA reveals that China is the biggest destination for most ticketing agents in the country.

“When it was hit, any agent who was dealing with China as a business destination registered a drop in sales. But along the way, airlines were running promotions and we advised our clients to book early so that they get cheaper fares.”

He adds: “Just like any other business in Uganda, the moment an agent issues an air ticket whether a client has paid or not, a travel agent has to pay twice on remittance; every two weeks the agent pays the cash,” he explains.

He further illustrates a scenario where an agent sold the volume of tickets and paid under the pretext that he would be paid by his loyal clients. “All of a sudden, clients could not travel, but you issued the tickets, and the client promised to pay you once the situation stabilises. This implies that the little liquidity that an agent has been using is no more.”

Suppliers strandedRelatedly, travel agents that have contracts with any government institution or Non-Governmental Organisation (NGO) are in a tight situation. Mujuzi says their payments are effected after a long time.

“This category has some agents who specialise in selling destinations such as Europe, United States for these organisations issued tickets. After the Ministry of Health issued a health guideline against Covid-19, travellers postponed for safety reasons.

These agents were tasked to look for money to pay for the tickets because the two weeks condition must be fulfilled. Some applied for overdrafts, others mortgaged whatever they had for survival.

In a telephone interview, Pearl Hoareau Kakooza, the president of Uganda Tourism Association (UTA) appealed to government to pay the domestic debts because it would help the travel agents with their cash flow.

Billing and settlement planAt the time of the interview, Hoareau, who also manages Uganda Travel Bureau (UTB) 2004, revealed that she was in her office to clear a pending IATA bill. She urged TUGATA members to clear their IATA dues to avoid being blacklisted, which could lead to loss of their IATA numbers.

However, she is disappointed that IATA has not stepped in amidst difficult times despite promises by the NGO to handle case by case. “IATA communicated that airlines are distressed and they want their money as quickly as possible. They are not considering any exemptions. I therefore, encourage members to observe their Billing and Settlement Plan (BSP),” the seasoned travel agent and vice chair TUGATA remarked.

According to IATA, a BSP is the central point through which data and funds flow between travel agents and airlines. Instead of every agent having an individual relationship with each airline, that information is consolidated through the BSP.

Agents make one single payment to the BSP (remittances), covering sales on all BSP airlines. The BSP makes one consolidated payment to each airline covering sales made by all agents in the country. The agents are provided with a range of electronic ticket numbers to be used for sales on any airline.

Setback in the refund processAs a result of the global crisis, TUGATA CEO Nicholas Kalyango requested IATA through United Federation of Travel Agents (UFTAA) to ask airlines to make a refund to the travel agents and also to extend the remittance dates since majority issue tickets on credit. He, however, expresses concern over some airlines that were willing to issue shopping or hotel vouchers to passengers instead of cash refund to travel agents.

“Imagine a travel agent booked the ticket, but the airline prefers to refund the owner of the ticket. Some clients get these tickets on credit from our members or make partial payments. It would be unfair to give them direct refunds,” Kalyango explains.

IATA responds In response, IATA acknowledges that the global airline industry is going through a grave crisis. In a letter addressed to the travel agent community dated April 2, 2020, IATA attributes the circumstances to Covid-19 that resulted into the closure of borders mobility restriction.

“One-third of the global fleet is parked, and we estimate that revenue from passenger ticket sales will fall 44 per cent this year compared to 2019. There simply is no precedent for what our members and you, our travel agent partners, are experiencing.”

Travel agents attend a meeting organised by Uganda Airlines to forge a working relationship

No penaltiesStill in the letter that I accessed, IATA explains there is an arrangement to allow travel agents to make settlements later, without penalties. However, on the issue of airlines withholding ticket refunds in the BSP, or issuing vouchers in lieu of refunds, the IATA director general, Alexandre de Juniac says: “I’m afraid that the message I have to deliver is not one that will provide comfort. Our industry is experiencing a critical liquidity crisis. Most airlines are spending more cash in reimbursing their passengers than they receive in new booking revenues.”

Most urgent needHe adds: “We recently estimated the industry’s liability in this area at $35 billion. In this context, airline’s most urgent need is to keep their remaining liquidity to pay salaries and face their fixed costs. In this context, we believe the best answer for both airlines and travel agents is for regulators to ease requirements for cash refunds and allow airlines to issue vouchers instead.”

He adds that these vouchers can be managed through the IATA BSP using procedures that already exist today.TUGATA reactionsPearl Horeau reveals that there is a refund process in the aviation industry. “When you sell a ticket, there is a passenger who says I won’t travel today, and asks you to defer or change a reservation to a later date. There are those who say because of Covid-19, I won’t fly and ask to extend the ticket till August or November.”

She adds: “Some will cancel their travel and ask you to submit their ticket for refund. There is a refund process but seemingly, those incharge don’t want to take that path. The refund is through credit and comes through IATA billing as an Agent Credit Memo (ACM).” The vice chairperson of TUGATA appealed to clients to be patient because in good times the refund process takes up to three months depending on the airlines. “We are going to refund them, but unfortunately the process will delay”.

IATA is embarking on a comprehensive approach to reboot the industry when governments and public health authorities allow. A muti-stakeholder approach is being and one of the steps is a series of virtual meetings, summits on a regional basis bringing together governments and sector stakeholders. IATA argues that alongside vital financial relief, the industry will also need careful planning and coordination to ensure that airlines are ready when the pandemic is contained.

Airlines position on refundDeo Nyanzi, the marketing manager of Uganda Airlines, appeals to clients to rebook and fly at a future date or to request for a refund. “The airline suspended all flights effective Monday March 23, until further notice. Ticket changes are free of charge. We are offering a waiver for change fees on all flights across our network.” Meanwhile, an official at the Turkish Airlines office in Kampala, who preferred anonymity said they are giving free changes valid for 12 months.

What they said

“The moment an agent issues an air ticket whether a client has paid or not, a travel agent has to pay twice on remittance. China is the biggest destination for most ticketing agents in the country and agents who were dealing with China as a business destination registered a drop in sales." Richard Mujuzi-Chairman TUGATA

“When you sell a ticket, there is a passenger who will say I won’t travel today and ask you to defer the reservation to a later date. Some will cancel the booking and ask you to submit their ticket for refund. There is a refund process but seemingly, they don’t want to take that path.” Pearl Horeau Kakooza PRESIDENT UTA

“The message I have to deliver is not one that will provide comfort. Our industry is experiencing a critical liquidity crisis. Most airlines are spending more cash in reimbursing passengers than they receive in new booking revenues.” Alexandre de Juniac-CEO International Air Transport Association (IATA)

Eagle Air is a Ugandan regional airline based at Entebbe International Airport, Kampala. In Uganda, the carrier operates scheduled and charter services to Arua. On diversion it flies to Gulu, Adjumani, Pakuba, Chobe, Juba and Yei.